Note: this primer is the first in a series of Ondema blog posts about Industry 4.0.
The Fourth Industrial Revolution? Industry 4.0? The Industrial Internet of Things (IIoT)? What’s behind these marketing buzzwords?
Manufacturing is in the early stages of being radically transformed by technology – again. Industry 4.0, another way of referring to the Fourth Industrial Revolution, is the name given to the infusion of today’s (and tomorrow’s) technology into evolving manufacturing systems.
Industry 1.0 through 3.0
In order to best understand what’s underway and what’s yet to come, let’s briefly revisit the first three Industrial Revolutions.
The First Industrial Revolution took place in the late 1700s and early 1800s. It was largely a transition from manual-labor-centric means of production to manual labor aided by water- and steam-powered production. Production done by humans and aided by animals was optimized to include rudimentary machines. Inventions such as the steam engine and cotton gin revolutionized the coal, iron, railroad, and textile industries.
The early 1900s brought about the Second Industrial Revolution. Steel was popularized as a cheaper and easier-to-use alternative to iron. Electricity introduced a brand new industry and enabled the expansion of others. Mass production practices such as the assembly line fueled growth in the transportation, petroleum, construction, and steel industries.
The early 1960s saw electronic technology become more prominent in production, giving rise to the Third Industrial Revolution. This began with processes moving from analog to digital with the implementation of early computers. Systems and processes became increasingly digitized and automated as computers and software became more powerful, scalable, and affordable.
And that brings us to today.
Industry 4.0 key drivers
Industry 4.0 (sometimes referred to as IIoT or smart manufacturing) is centered around cyber-physical systems and powered by interconnectivity, machine learning, real-time data, and automation.
Interconnectivity builds on the concept of the Internet of Things – the extension of internet connectivity beyond traditional computing platforms to a broad spectrum of devices. Interconnectivity refers to the ability of people, machines, devices, and sensors to exchange large amounts of data and communications ever more seamlessly.
Here’s an example to illustrate the concept. As you walk to your office’s front door before normal working hours, a sensor detects a unique encryption key in your smartphone and automatically unlocks the door. Data is sent to the building’s security software which logs your arrival and turns on all the lights in hallways leading to your office. Since it’s Zero Dark Thirty, a signal is sent to the smart coffee maker at your work station which starts brewing a fresh cup of dark roast. The coffee maker is running low on beans so it sends a purchase request to the company’s ERP, which compiles and prioritizes all such requests and places orders to be delivered later that morning.
Machine learning systems can train themselves to learn from big data to identify patterns, conduct analysis, and make evolving decisions with minimal direction and intervention from humans. With the availability of large amounts of complex data, such as that from a connected factory, machine learning accelerates a company’s ability to optimize processes and execution. Think Skynet, but with tighter parameters and much less focused on destroying humanity.
Real-time data is another way of referring to big data compiled and exchanged in real time. This is the massive amount of data, structured or unstructured, that can be collected, communicated, and analyzed for a variety of purposes – optimization, modeling, machine learning, etc.
Automation refers to the ability for all of the above to happen, well…automatically. The concept of a “lights-out” factory – a plant where automation is so prevalent that lights aren’t needed – illustrates the importance of automation to improving processes and flexibility while lowering production costs.
There are many more concepts and technologies positioning themselves to help bring the Factory of the Future to the present. Collaborative robots (cobots) and edge computing are just a few of many cool examples.
The shift from products to servitization
Coincident with the implementation and optimization of these technologies is a shift in models from manufacturing products to providing products-as-a-service. This shift enables companies to deliver better value to the customer and, in turn, create more stable recurring revenue streams and receive higher lifetime value from the customer.
Products-as-a-service, or servitization, isn’t a new concept. Rolls-Royce’s pioneering “Power by the Hour” aircraft engine maintenance model in 1962 better aligned the interests of manufacturers and operators. However, the industry-wide transition from sellers of products to sellers of services around products is fairly new territory.
With change, opportunities abound
With the onset of these new technologies, change is happening faster and more frequently than ever before. Risk and opportunity abound during times of rapid change.
The technologies touched on above aren’t isolated to simply the process of manufacturing goods. They’ll upend and improve the entire manufacturing value chain from supply chain management to customer experience. Industry 4.0 allows delivery of more value, faster, and with greater flexibility.
Manufacturers big and small are embracing the move to Industry 4.0 as they implement new technologies and update systems and processes surrounding the new technologies. In many cases, legacy systems are unfit for purpose and must be re-engineered so companies can best position themselves to transition, compete, and grow in the new manufacturing economy.
Many manufacturing incumbents started the transformation years ago. Somer have yet to implement these new technologies. In many cases the first step, especially for those businesses with siloed (or analog) processes, is to digitize the management of operations through a unified software system.
Future Ondema blog posts will dive into specific use cases, benefits of adopting an Industry 4.0 model, roadmaps for implementation, and other topics of interest.
There’s an ocean of material out there on Industry 4.0. If you’re interested in learning more from a variety of perspectives, here are a few of our favorites:
Industry 4.0 – Reinventing the Factory Stack by Robin Dechant of Point Nine Capital
Embracing Industry 4.0 and Rediscovering Growth by Olivier Scalabre of the Boston Consulting Group
Forces of Change: Industry 4.0 by Mark Cotteleer and Brenna Sniderman of Deloitte Insights